SIC 7812 Motion Picture and Videotape Production
SIC 7812
This category covers establishments primarily engaged in the production of theatrical and nontheatrical motion pictures and videotapes for exhibition or sale, including educational, industrial, and religious films. Included in the industry are establishments engaged in both production and distribution. Producers of live radio and television programs are classified in SIC 7922: Theatrical Producers (Except Motion Pictures) and Miscellaneous Theatrical Services. Establishments primarily engaged in motion picture and videotape reproduction are classified in SIC 7819: Services Allied to Motion Picture Production and those engaged in distribution are classified in SIC 7822: Motion Picture and Videotape Distribution.
512110
Motion Picture and Video Production
The U.S. motion picture and video production industry serves as a major supplier of entertainment and information to the world by producing videos, television programs, and movies that can be seen in more than 100 countries. Industry leaders in 2006 were the same names that had been at the top for years: Disney, Paramount, Warner, Universal, Fox, and Sony. Strong box office revenues reflected the overall health of the industry, with Sony, Warner, and Disney passing $1 billion at the box office. Totaling $9.49 billion in 2006, domestic ticket sales remained high, while worldwide sales hit a record total of $25.82 billion that year. Sixty-three out of a total 599 film releases in 2006 grossed an excess of $50 million, 12.5 percent more than did in 2005. Total admissions, also were up, from 1.4 billion in 2005 to $1.45 billion in 2006. Admission prices averaged $6.55
In the 1990s, despite hefty profits, some segments of the industry felt the effects of the recession. Fewer people went to the movies in 1992 than during any single year in the 1980s, for example. Following the recession, box-office revenues climbed again, but competition from cable television and video sales continued to erode the theatrical audience. A challenging economic climate emerged again during the early 2000s. However, the industry fared relatively well as interest in movies at the theater and on home video remained strong.
The home video market played an increasingly important role for the industry. The popularity of affordable digital videodiscs (DVDs) exploded, with combined sales and rental figures growing to more than twice the revenues from U.S. box offices. DVD retail sales alone saw a 33 percent increase in 2004, growing to $15.5 billion. By 2006, 84 percent of households had DVD playing capabilities, and 99.7 percent had VCRs. Other home video options, including on-demand delivery and Internet downloads, also helped shrink use of the VHS tape format. With the inexpensive technology, however, came significant levels of piracy, an issue identified by those in the industry as the biggest concern, due to the millions of dollars of lost revenue.
The U.S. film industry prepared to implement large-scale technical changes in 2005. The major studios cautiously planned to finance upgrading theaters with digital projection systems while simultaneously seeking to control piracy problems. These issues also impacted distribution schedules, with more films being released on the same date world-wide and with video releases being offered far more quickly.
Motion picture and videotape production is one element of a larger three-part industrial structure. After a movie or a video is produced, it is usually transferred to a distributor, who in turn arranges to make the product accessible to the consumer through movie theaters, video rental and/or sales outlets, and television broadcasts. In the case of movies, the distribution company and the theater usually split the box office receipts. The financial and management structures of a production company often depend on the company's relationship to the distribution arm of the industry, which in turn is influenced by a company's size.
Production companies can be classified according to three major categories: the "majors," the "mini-majors," and the "independents." The majors include large conglomerates such as Time Warner, Walt Disney, Sony, Universal, and Fox Entertainment. A single corporate structure often controls production as well as distribution of films, along with an array of related operations through which the corporation can market movie soundtracks, toys, and other promotional tie-ins. Warner Bros., whose merger with Time, Inc. in 1989 dramatically strengthened its distribution system, presented one of the most striking examples of coordinated production and distribution. Some major film corporations also invested in movie theaters, despite the history of antitrust actions against theater chains owned by studios. Slightly smaller companies, often called "mini-majors," may have weaker distribution powers and may specialize in a specific segment of the film market, such as art films or action films. Small independent filmmakers may have no distribution capability at all and must depend entirely on outside distribution companies.
Because success in the film production industry depends largely on a wide distribution network and access to the substantial capital required for film production, major film companies have obvious advantages over smaller companies. In addition to distribution capabilities, many of the major studios have operated long enough to build up sizable film libraries, which provide revenue through video sales or through sale or rental to television stations. These well-established companies are likely to wield substantial financial leverage and control physical production facilities. In fact, small production companies and independent filmmakers often rent the production facilities of the larger companies.
During the studio era, which lasted from 1920 to 1950, major studios considered their stable of stars, directors, and other talent under long-term contract as assets. Movie companies in the 1990s and early 2000s, however, were more likely to sign contracts with artists for a single project. Such one-time contracts have given talent agents considerable power over the production process. Often agents will assemble a "package" including a script, a director, and a star and sell the whole project to a studio. By performing much of the preproduction work on a project themselves, agents give clients greater control over the kinds of projects they undertake. This sort of arrangement limits the movie company's artistic involvement to that of an investor who simply provides the money, facilities, and equipment required to complete the project.
The explosion of new television technologies that began in the late 1970s had a significant impact on the financial structure of film production and helped to encourage independent production. Developments such as cable TV, video cassettes, and pay-TV services like Home Box Office (HBO) stimulated demand for new films and created new options for film financing. These ancillary markets allowed movie companies to sell distribution rights before production even began on a movie. HBO, for example, helped to finance new movies in order to ensure the steady supply of films necessary to fill its programming schedule. Video rentals have proven to be an even greater source of revenue for motion picture companies. During the late 1990s, a report by the American Film Marketing Association stated that slightly more than 43 percent of motion picture sales were derived from television, while video contributed nearly 26 percent and theatrical releases a little more than 31 percent. By the time a feature film has been fully exploited, it has been released in a theater, on home video and pay-per-view channels, on cable television, and on the major television networks, most likely in that order.
Ancillary markets have been a boon to production companies of all sizes, but independent producers have had special cause to celebrate their rise. Lacking the financial leverage of the majors, small movie companies often had to struggle to gather the capital required to make a film. The ability to sell ancillary rights to pay cable and video companies expanded the financial resources available to independents, resulting in a healthy growth of independent film production since the mid-1980s. During the mid-1990s a growing network of satellite broadcasting systems, the arrival of an exciting new high-quality, low-cost consumer digital video system (DVD), and the latent potential of the emerging Internet created an ever-widening range of distribution channels, all hungry for new content.
By 2005, technological developments challenged solidly established distribution routines, affecting both corporate structures and film release schedules. The major studios debated how to implement digital cinema, replacing print distribution and projection. The big conglomerates quietly planned to finance the vast project of replacing projection equipment for 36,652 screens. The innovation of digital distribution, which eliminated the need for costly print-making facilities, was seen as a challenge to established companies that were invested in print making.
In addition to producing a steady supply of feature films, many movie studios also provide programming for television. Tele-film productions range from made-for-TV movies to half-hour situation comedies. Major movie studios accounted for approximately one-half of all prime-time programming for the networks during the early 1980s, with gaps filled by independent tele-film producers such as Mary Tyler Moore's MTM Enterprises. Prior to 1991, the Federal Communications Commission (FCC) actually restricted the amount of programming...
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